Noble’s Asset Portfolio Impresses Despite Price Concerns

On Nov 28, 2016, we issued an updated research report on Noble CorporationNE.

Noble Corp. is a leading offshore drilling firm with a robust portfolio of assets, which provides diversified services for the oil and gas industry. Though the industry has witnessed a setback in the past few months, the company is likely to be less impacted by it than its peers. This is because Noble Corp. enjoys a strong backlog position of $4.7 billion.

As of Sep 30, 2016, around 62% of the company's available rig operating days were committed for 2016, including 41% of floating rig days and 85% of jackup rig days. For 2017, an estimated 47% of available rig operating days are committed. This consists of 28% and 69% of floating and jackup rig days, respectively. These secured commitments cushion the company from the volatile pricing market.

With less oil being discovered on land and companies having to dig ever deeper to get to their reserves, Noble is poised to benefit from a market with robust multi-year demand trends, given its technologically advanced and versatile drilling fleet.

Noble Corp. has incessantly endeavored to upgrade its fleet through acquisitions and newbuild projects. Moreover, it continues to benefit from its robust position in the ultra-deepwater market.

However, the offshore drilling industry is challenged with rig oversupply, which is a cause for concern for the likes of Noble Corp. as this could hamper contract flow and dayrates. In addition to this, major oil companies are lowering deep-water capital spending, which is making the situation worse.

Moreover, Noble Corp. remains highly leveraged to the North Sea, where tax regime changes could have a significant impact on the future demand.

We also remain concerned about company-specific risks like new product growth challenges, potential backlog losses and high dependency on its top customers. Additionally, delays in deepwater infrastructure awards may limit the company’s growth prospects.

SunCoke Energy posted a positive earnings surprise of 177.78% in the last reported quarter. It reported a positive earnings surprise in three of the four preceding quarters.

Suncor Energy posted a positive earnings surprise of 300.00% in the preceding quarter. It reported an average earnings surprise of 40.55% for the four preceding quarters.

Futurefuel Corp. posted a positive earnings surprise of 20.83% in the last reported quarter. It reported a positive earnings surprise in all of the four preceding quarters.

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